2013 (6) TMI 251 - HC - Income Tax

Reassessment - notice u/s 148 based on report of the Transfer Pricing Officer - Held that - The basis was already known and it is always the duty of the Assessing Officer to procure the relevant material which, if at all, to be put to the assessee before concluding the assessment, but that does not vitiate the reopening.Though the learned counsel for the appellant has placed reliance on the judgment of the Supreme Court in the case of Asst. CIT v. Dhariya Construction Co. 2010 (2) TMI 612 - Supreme Court of India , we find, that was a case where the Supreme Court took the view that the opinion of the DVO cannot itself be substituted that the opinion of the Assessing Officer, who has passed the order on escapement of income and in the present case, we find the opinion is formed by the Assessing Officer and the reference if at all to the Transfer Pricing Officer is later for confirming, etc. - Decided against the assessee.

Summary

Issues:
Reopening of concluded assessment for the assessment year 2006-07 based on notice under section 148 of the Income-tax Act, 1961.

Analysis:
The writ appeal challenged the reopening of the assessment for the year 2006-07 by an assessee, a private limited company, under section 148 of the Income-tax Act. The assessee contended that there was no tangible or credible information with the Assessing Officer before issuing the notice for reopening. The learned single judge examined the reasons recorded by the Assessing Officer and rejected the contention, stating that there were reasons recorded before reopening. The judge dismissed the writ petition, leading to the present appeal.

The appellant's counsel argued that the relevancy of the reason for reopening should be based on the nature of the transaction and the manner of assessment for the earlier year, 2005-06, and not on the Transfer Pricing Officer's opinion for a later year. The counsel claimed that the Assessing Officer conducted a roving enquiry to gather information after proposing to reopen the concluded assessment.

On the other hand, the Revenue's counsel argued that the Assessing Officer formed the opinion of income escapement for the year 2006-07 based on the valuation of international transactions from the earlier year and the lack of transparency in pricing due to mutual relationships with business associates. The counsel contended that the nature of transactions by the assessee for the earlier year formed the basis for the opinion of income escapement for the current year.

The court found the Assessing Officer's reasoning relevant in the context of income escapement for the assessment year, irrespective of the source of information. The court noted that the Assessing Officer's opinion was based on the similarity of transactions by the assessee for both years, indicating a pattern of non-transparent pricing due to mutual relationships. The court emphasized that the Assessing Officer had already considered the transaction nature before seeking a report from the Transfer Pricing Officer for the current year, indicating a pre-existing basis for reopening.

The court rejected the appellant's reliance on a Supreme Court judgment, emphasizing that the Assessing Officer's opinion was crucial in determining income escapement. The court upheld the learned single judge's decision to dismiss the writ petition, concluding that the reopening was valid based on the Assessing Officer's formed opinion and pre-existing basis for income escapement.